21st jan, 2013

Major Economist article about innovation goes nowhere

In one of the last issues of The Economist there is along article called “Has the Ideas Machine broken down?”. On the four pages the innovation crisis is dissected. Signs of a crisis comes from growth numbers, R&D contribution to productivity and the perceived slowing down of new inventions.

On its face the article is convincing, but after giving it some thought I’m not convinced. Almost 3 pages are discussing the third factor: the perceived slowing down. One of the economists cited is Robert Gordon and his article “Is U.S. Economic Growth Over?”. In his article he describes how economic growth – in the US -due to innovation will slow down due to what he calls the six headwinds – factors of society that influences us all. Examples of these are demography, globalization and education. He clearly points out that “This article concerns only the United States and has no necessary implications for other countries, which face a different mix of headwinds”. Below is Gordons graphic showing decreasing US innovation.

It’s a bit much to present the article as part of the base of the claim that innovation has broken down.

One of thepoints of the article is that we don’t see as many ground breaking inventions as before. Plumbing revolutionized the world – so where is the next plumbing. In my opinion the world is still trying to discover the potential of IT and the internet and the next Iphone may not be plumbing 2.0 but is a small part of discovering what lies hidden in data and sharing. It’s like comparing twitter to going to the moon, and not recognizing the social, political and cultural impact of the new media.

The article has one good point – a fable about a chessboard. “There is an old fable in which a gullible king is tricked into paying an obligation in grains of rice, one on the first square of a chessboard, two on the second, four on the third, the payment doubling with every square. Along the first row, the obligation is minuscule. With half the chessboard covered, the king is out only about 100 tonnes of rice. But a square before reaching the end of the seventh row he has laid out 500m tonnes in total—the whole world’s annual rice production. He will have to put more or less the same amount again on the next square. And there will still be a row to go.” And concludes that “On the second half of the chessboard not only has the cumulative effect of innovations become large, but each new iteration of innovation delivers a technological jolt as powerful as all previous rounds combined.”

This is a very good point and fits IT very well. We haven’t tapped the full potential yet, but each new step/invention brings us forward with a huge step.

One other curious fact is that the article casually throws away patents as any evidence of innovation – I hope its only US patents that cannot be used to measure innovation.

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